Supply, Demand and Price Elasticity of Coffee

Topics: Supply and demand, Caffeine, Price elasticity of demand Pages: 3 (1001 words) Published: June 13, 2011
When many individuals wake up in the morning, the first thought they often have is: where is the coffee? The price of coffee fluctuates no matter what quantity is sold. The following paper will discuss what makes the price of coffee rise and what consumers do when the price is more than they are willing to pay. Many factors are taken into consideration when the price of coffee is being determined. The main two factors are the supply that is demanded and the availability of substitutes, which will be discussed below. Coffee is a commodity enjoyed all over the world. Bistros in Paris to large franchise chains in the United States; the fact is people love coffee. Take a look at the causes for shifts in supply and demand for one of the best commodities in the world. These shifts can occur for many reasons, for example, the weather, political unrest, balance of trade, and the world economy. Coffee growers have even been known to cause production to be below average in an attempt to cause scarcity and drive the prices up. Laws of supply and demand will always cause the price of coffee to fluctuate (Coffee cravings, 2011).

The price of coffee beans is volatile because there are concerning shifts in supply and demand. These beans are produced in countries with warm climates, for example Brazil, Columbia, Jamaica, and some parts of Africa. This commodity is exported and imported around the world. With supply being suppressed, the price of beans will continue to increase. In the following table the shift of supply and demand shows to be a volatile commodity, no matter what causes the shift.

These shifts can be linked to consumers being aware of environmental and ethical practices (Accuval Organization, 2011). When any influence other than the price of the product changes such as income or tastes, demand changes, and the entire demand curve will shift (either upward or downward). A shift to the right (and up) is called an increase in demand, whereas a...
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